Interim Report January - September 2016

Press release

Interim Report January - September 2016

NET ASSET VALUE AND THE LATOUR SHARE

•  The net asset value rose to SEK 349 per share, compared with SEK 317 per share at the beginning of the year. This is an increase of 12.5 per cent, adjusted for dividends. By comparison, the Stockholm Stock Exchange's Total Return Index (SIXRX) increased by 6.0 per cent. The net asset value was SEK 338 per share at 2 November (1).
•  The total return on the Latour share was 15.1 per cent in the period compared with 6.0 per cent for the SIXRX.

INDUSTRIAL OPERATIONS
The third quarter

•  The industrial operations' order intake rose 9 per cent to SEK 1,940 m (1,782), which represents a 1 per cent increase for comparable entities adjusted for foreign exchange effects.
•  The industrial operations' net sales rose 13 per cent to SEK 1,990 m (1,759), which represents a 5 per cent increase for comparable entities adjusted for foreign exchange effects.
•  The operating profit increased by 17 per cent to SEK 271 m (231), which equates to an operating margin of 13.6 (13.1) per cent for continuing operations.
•  The Nord-Lock Group acquired the Expander Group with annual sales in excess of SEK 70 m and 45 employees. At the close of the quarter, Swegon acquired Ruskin Air Management Ltd with annual sales of approximately SEK 290 m and 220 employees.

January - September

•  The industrial operations' order intake rose 13 per cent to SEK 6,107 m (5,424), which represents an 8 per cent increase for comparable entities adjusted for foreign exchange effects.
•  The industrial operations' net sales rose 13 per cent to SEK 5,922 m (5,244), which represents an 8 per cent increase for comparable entities adjusted for foreign exchange effects.
•  The operating profit increased by 22 per cent to SEK 780 m (640), which equates to an operating margin of 13.2 (12.2) per cent for continuing operations.

GROUP

•  Consolidated net sales totalled SEK 6,030 m (5,244) and profit after financial items was SEK 3,015 m (2,505). The profit includes capital gains of SEK 890 m (670), which is equivalent to SEK 5.58 per share.
•  The Group's profit after tax was SEK 3,018 m (2,372), which is equivalent to SEK 18.92 (14.87) per share.
•  Net debt at the end of September was SEK 1,894 m (3,581) and is equivalent to 3.5 per cent of the market value of total assets.

INVESTMENT PORTFOLIO

•  In the period, the value of the investment portfolio increased by 11.0 per cent adjusted for dividends and changes in the portfolio. The benchmark index (SIXRX) increased by 6.0 per cent.

EVENTS AFTER THE REPORTING PERIOD

•  There were no material events subsequent to the end of the reporting period.

(1) The calculation of the net asset value on 2 November 2016 was based on the value of the investment portfolio at 1 p.m. on 2 November and the same values as on 30 September were used for the unlisted portfolio.

Comments from the CEO
“Our wholly-owned industrial operations continued to expand in the third quarter. Both order intake and net sales reported growth of 9 and 13 per cent respectively over the previous year. Organic growth has been very good for a sustained period. In this quarter, however, order intake only achieved organic growth of just over 1 per cent and invoiced sales delivered organic growth of 5 per cent. This can be attributed to weak sales development in July and August.

The construction industry remains strong in many parts of Europe and I believe that this trend may continue for some time and will benefit the late-cycle areas of our business, which means Swegon first and foremost. Although growth improved in September, signs indicate that we cannot count on growth continuing at the same steady rate as it has for a number of quarters now. Comparative figures are becoming progressively tougher. The Hultafors Group, which reported 19 per cent organic growth last quarter, grew organically by a more modest 3 per cent in the third quarter. Nord-Lock and Latour Industries show no organic growth, while Swegon had another good quarter and grew by almost 10 per cent. We are still seeing a fragmented picture across the markets of Europe. The region with the strongest growth is still the Nordic countries, driven primarily by Sweden. Germany and Poland are also enjoying positive growth and there is clear evidence of stability in other regions of Europe. There is considerable caution in the UK in the wake of the Brexit vote, even though the impact for us is generally manageable. The long-term effects of Brexit are still as uncertain for us as they are for many others. The UK is not an unimportant market for us, especially after the acquisition of Ruskin.

It is still difficult to assess how markets in the rest of the world will develop. The industrial sector in North America has been experiencing slow growth for quite a while now. The question is how long construction-related businesses can support the economic climate. We feel that the general market situation in South-East Asia, including China, is still unsettled, and the shipbuilding crisis in Korea has generated great uncertainty there. However, one should note that only 13 per cent of the industrial operations’ sales are outside of Europe, but that a full 71 per cent is outside of Sweden.

The order intake in the quarter increased in total by 9 per cent and organically by just over 1 per cent. Net sales rose 13 per cent to SEK 1,990 m (1,759), with organic growth accounting for 5 per cent of this. The operating profit increased by 17 per cent to SEK 271 m (231) which corresponds to a strong operating margin at 13.6 (13.1) per cent. This has been our best third quarter ever in absolute terms.

Thanks to our growth, fine earnings performance and stable financial situation, we are well-positioned to consistently think and act ahead, as we have in the past, no matter how the markets change. Despite relatively weak market growth, we are confident that our firm footing will allow us to continue to report strong earnings.

The industrial operations were complemented with two acquisitions in the third quarter. At the beginning of July, the Nord-Lock Group acquired the Expander Group, which specialises in the manufacture and marketing of the Expander® System, expandable pivot pin systems for heavy machinery. On 30 September, Swegon acquired Ruskin Air Management Ltd., a leading UK manufacturer of air distribution and fire damper products. The company complements Swegon well and gives it a very strong sales platform in the UK.

Most of our listed holdings have submitted their reports for the third quarter. These companies are reporting strong growth, with some exceptions.

The value of the investment portfolio increased by 11.0 per cent in the nine-month period, adjusted for dividends, while the benchmark index (SIXRX) increased by 6.0 per cent. The net asset value in Latour increased in the same period by 12.5 per cent to SEK 349 per share, adjusted for dividends.

To sum up, I feel that developments are very positive but that we’ll be seeing rather more challenging market conditions in the future.”

Jan Svensson
President and Chief Executive Officer 

For further information please contact:
Jan Svensson, President and CEO, Tel. +46 705-77 16 40 or
Anders Mörck, CFO, Tel. +46 706-46 52 110

Conferense call
President and CEO Jan Svensson and CFO Anders Mörck present the report and answers to questions by telephone today at 11.00 AM (CET). The conference call will be held in English.
To follow the meeting, please call +46 (0)8 566 426 90
To follow the webcast please visit our webpage or use the link:
http://event.onlineseminarsolutions.com/r.htm?e=1282128&s=1&k=44FDD7274B4F4CC4E2AEE7E8E0CC1B9D